Commercial Applications
Which of the following is/are the function(s) of central bank?
- Banker's bank
- Provides overdraft facility to the public.
- Receive deposits from the public and business firms
- Provide short-term and medium-term loans to customers
Answer
Banker's bank
Reason — The central bank acts as the bank for all commercial banks in the country — when a commercial bank needs funds it can obtain loans and rediscount its bills with the central bank. Therefore, the central bank is called 'banker's bank' and 'lender of last resort'. The other options (providing overdraft, accepting deposits from public, providing loans to customers) are functions of commercial banks; the central bank does not deal with the public directly.
Related Questions
Central bank is owned by the while commercial bank is owned by .
- Shareholders, shareholders
- Government, shareholders
- Shareholders, government
- None of these
Assertion (A): Commercial banks primarily engage in profit-oriented activities.
Reason (R): Commercial banks have the authority to set monetary policies, establish reserve requirements, and conduct financial stability assessments to ensure the sound functioning of the banking system.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A
- Both A and R are true but R does not explain A
It means signing on the back of the negotiable instrument with the objective of transferring its ownership.
- Endorsement
- Pay-in slip
- Crossing a cheque
- Bank draft
The Statutory Liquidity Ratio (SLR) requires commercial banks to maintain a certain percentage of their liabilities in liquid assets, which can include government securities.
- True
- False